Britain will not foot the bill for Greek loan, says George Osborne: We're “not in the euro”

Chris Papadopoullos was City A.M.'s economics reporter until February 2016.

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Chris Papadopoullos

Britain could be asked to pay £1bn for a short-term loan while Greece agrees a new bailout

Chancellor George Osborne laid down the gauntlet to his Eurozone peers yesterday and said that the UK would refuse to put £1bn towards a short-term loan to Greece.

If Brussels insists the UK foots part of the bill, it would threaten relations between British and EU leaders as Osborne gears up to renegotiate the country’s membership terms.

“Britain is not in the euro, so the idea that British taxpayers will be on the line for this Greek deal is a complete non-starter. The Eurozone needs to foot its own bill,” Osborne said, arriving for a meeting of European finance ministers.

“We’ve been clear we do not think British taxpayers should be providing funding for the Eurozone. We should be clear that there is no proposal on the table,” a spokeswoman for Cameron said.

It comes after reports on Monday suggested that Eurozone officials were considering using the he European Financial Stabilisation Mechanism (EFSM), which is funded by every EU member, to lend money to Greece. It would only be a short-term loan until a longer-term bailout deal is reached.

But in 2010 a promise was made to the UK that the EFSM would not be used for Eurozone bailouts and would be replaced by the European Stability Mechanism, which is only funded by countries in the Eurozone.

“It was a clear political promise that it [the EFSM] would not be used anymore so it raises a lot of questions about trust,” Raoul Ruparel, director of think tank Open Europe told City A.M. “The UK already has concerns over the dominance of the Eurozone within the EU.”

“It would certainly strengthen the case of those who want to see the UK leave.”

Ruparel believes short-term loans from individual Eurozone members to Greece would be the best option, especially given that many countries can borrow at negative interest rates over such a period.

As well as the UK, Sweden and Denmark also oppose using the EFSM, Spanish finance minister Luis de Guindos said yesterday.